Question

( Assignment Score 723 Question of 15 > Jerry carns a base salary of $50,000 as a photographer and is subject to the following hypothetical income tax bracket Jerry is considering taking on an additional photoshoot that will increase his income by 55,000. In order for Jerry to deem the photoshoot worth his time, it must carn him $3,000 after taxes. Please round all answers to two decimal places Tax rate 106 SO-510.000 $10,00-1000 530.00-$50.000 $50,001+ 205 50 What is the marginal tax rate associated with taking on this photoshoot? What is Jerry's average tax rate if the extra photoshoot is accepted? Given the information, will Jerry undertake this extra photoshoot? O yes Ово O need more information How much does Jerry end up paying in taxes?

Answer 1

Solution:

Since after taking the additional photoshoot, the income becomes more than $50000, the marginal tax rate will be 50%.

after accepting the additional photoshoot, total tax paid = (10000*0.05)+ ((30000-10000)*0.1) + ((50000-30000)*0.2) + ((55000-50000)*0.5) = 500 + 2000 + 4000 + 2500 = $9000.

Average tax rate = (9000/55000)*100 = 16.36%

Jerry will not undertake extraa photoshoot because ultimately he ends up getting $2500 and not $3000 for the photoshoot.

Jerry ends up paying (10000*0.05)+ ((30000-10000)*0.1) + ((50000-30000)*0.2) =  $6500 in taxes because he did not accept additional photoshoot.